Increases had cost the taxpayer £6.3 billion since the start of the 2008 recession, he said in a defence of the squeeze announced by Chancellor George Osborne last month.

But the Opposition, which has pledged to oppose the move, produced its own analysis suggesting that Jobseeker's Allowance (JSA) had risen by less than earnings over the past decade.

Legislation being debated by MPs for the first time on Tuesday will break the traditional link between benefit rises and inflation.

Instead there will be a three-year cap of 1%, well below the expected rise in the cost of living, on most working-age benefits and tax credits for three years from 2013/14.

Child benefit, housing benefit and Universal Credit will be capped for two years from 2014/15.

The restriction is predicted to save the Government almost £2.4 billion by the 2015 general election and a further £11.8 billion in the three years after it.

But critics say it will hit low and middle-income families and increase homelessness and hunger

George Osborne told MPs in his Autumn Statement last month that the incomes of those on out-of-work benefits had risen "twice as fast as those in work" over the last five years.

The DWP said its analysis was based on Office for National Statistics data while Mr Osborne used figures from the Office for Budget Responsibility.

Mr Duncan Smith said: "Working people across the country have been tightening their belts after years of pay restraint while at the same watching benefits increase. That is not fair.

"The welfare state under Labour effectively trapped thousands of families into dependency as it made no sense to give up the certainty of a benefit payment in order to go back to work.

"This government is restoring fairness to the system and Universal Credit will ensure it always pays to be in work."

Shadow work and pensions secretary Liam Byrne said longer-term figures showed JSA had risen by 32% since 2002/3 while average earnings rose 36% over that time.

"Iain Duncan Smith has given the green light to a £14 billion cut to tax credits that's pushing millions of working families into poverty and now means thousands of part-time workers are better off on benefits.

"Now he wants to hit working families again with his strivers tax bill. Yet this omnishambles government thinks its right to give an average £107,000 tax cut for 8,000 millionaires," he said.

"This Tory-led government is comprehensively out of touch with the reality of Britain's working families."